United States District Court, Northern District of Indiana, South Bend Division
OPINION AND ORDER
Rudy Lozano, Judge United States District Court
This matter is before the Court on: (1) Defendant Madison National Life Insurance Company’s Motion for Summary Judgment, filed on June 17, 2013 [DE 49]; (2) Defendant Disability Reinsurance Management Services, Inc.’s Motion for Summary Judgment, filed on June 17, 2013 [DE 51]; and (3) Defendants’ Motion to Exclude Report and Testimony of Robert DiLisio and Brief in Support Thereof, filed on June 17, 2013 [DE 53]. Upon due consideration, the summary judgment motions are GRANTED IN PART and DENIED IN PART. Counts II and III of the Amended Complaint are dismissed. The motion to exclude DiLisio’s report and testimony is GRANTED IN PART and DENIED IN PART. DiLisio’s testimony regarding industry standards is admissible but his opinions on the issue of whether Defendants acted in bad faith are precluded.
Lisa McClain (“McClain”) worked as a third grade teacher at Logansport Community School District (“Logansport”) for approximately 13 years. In 2006, she suffered a stroke but was able to return to work the following year. She worked until 2010, but then McClain claimed that she was unable to work due to disability. McClain alleges that she had a long term disability benefits policy (“Policy”) issued by Madison National Life Insurance Company (“Madison”) and administered by Disability Reinsurance Management Services, Inc. (“DRMS”), under which Madison agreed to pay long term disability benefits in the event McClain became disabled. The Policy was issued with an effective date of January 1, 2010. McClain alleges that she became totally disabled on January 22, 2010, but Madison has refused to pay her claim.
McClain has sued Defendants Madison and DRMS asserting that Madison breached their contract (Count I) and the covenant of good faith and fair dealing (Count II). (DE #26). McClain further alleges that both Madison and DRMS breached their fiduciary duties owed to McClain (Count III). Following the close of discovery, the instant motions were filed. They are now fully briefed and ripe for adjudication.
Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is proper only if it is demonstrated that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Nebraska v. Wyoming, 507 U.S. 584, 590 (1993); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In other words, the record must reveal that no reasonable jury could find for the nonmovant. Karazanos v. Navistar Int’l Transp. Corp., 948 F.2d 332, 335 (7th Cir. 1991); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). In deciding a motion for summary judgment, a court must view all facts in the light most favorable to the nonmovant. Anderson, 477 U.S. at 255; NUCOR Corp. v. Aceros Y Maquilas de Occidente, 28 F.3d 572, 583 (7th Cir. 1994).
The burden is upon the movant to identify those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, ” if any, that the movant believes “demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323. Once the movant has met this burden, the nonmovant must support its assertion that a fact is genuinely disputed by citing to particular parts of materials in the record. Fed.R.Civ.P. 56(c); Becker v. Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir. 1990); Schroeder v. Lufthansa German Airlines, 875 F.2d 613, 620 (7th Cir. 1989). “Whether a fact is material depends on the substantive law underlying a particular claim and ‘only disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment.” Walter v. Fiorenzo, 840 F.2d 427, 434 (7th Cir. 1988) (emphasis in original) (citing Anderson, 477 U.S. at 248).
“A party who bears the burden of proof on a particular issue may not rest on its pleading, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact which requires trial.” Beard v. Whitley Country REMC, 840 F.2d 405, 410 (7th Cir. 1988) (emphasis in original); see also Hickey v. A.E. Staley Mfg., 955 F.2d 1385, 1391 (7th Cir. 1993). Therefore, if a party fails to establish the existence of an essential element on which the party bears the burden of proof at trial, summary judgment will be appropriate.
McClain’s Employment with Logansport School Corporation
From approximately 1996 until 2010, McClain was employed by Logansport School Corporation (“LCS”) as a third-grade teacher. (McClain Dep. at 8). Comments from a review of McClain’s performance in 2005 indicate she was an effective teacher and a leader in her school.
Mrs. McClain had instructional time well organized and paced to sustain the interest of students. She kept the discussion moving by encouraging students to voice their thoughts and opinions and ask questions. Transitions were smooth and student behavior was monitored.
Mrs. McClain maintains a very pleasant learning environment for students. Her classroom has a warm and inviting atmosphere. She interacts well with students and specifies behavior expectations, treating students fairly and equitably. When disciplining or correcting negative behavior, she does it privately so as not to embarrass the students and keep their self esteem in tact [sic].
Mrs. McClain interacts with students and fellow staff members in a positive manner. She takes initiative to develop and promote special programs. She organized and continues to chair the 5-Star Family program at Landis. This has proven to be a successful program in promoting parent and family involvement.
(Lamson Aff. Ex. A at 217-18).
In October of 2006, McClain suffered a cerebrovascular accident (“CVA”) or stroke that left her with permanent brain damage. (Id. at 171-209). As a result, McClain spent four weeks in rehabilitative therapy. (Id. at 219).
In February and March of 2007, McClain received neuropsychological testing from Theresa Strout, HSPP Ph.D. (“Dr. Strout”) to assess her cognitive function. (Document Production of Lisa McClain, DE 49-2 at 2-6). Dr. Strout opined that McClain’s intellectual ability, executive functions, and attention/memory functions were all within “normal” - that is, low-to-high average - ranges. (Id.). Dr. Strout concluded that “there is no evidence of loss of intellectual functioning.” (Id.).
By March 13, 2007, Bradley Vossberg, McClain’s physician, opined that she could return to work. (Document Production of Lisa McClain, DE 49-2 at 1). Dr. Vossberg wrote in an office note:
Her IQ is good. High-average verbal memory. Visual memory is average to low-average, this is her biggest deficit. Neuropsych testing showed mild impairment ... She should be able to return to work.
McClain returned to work at LCS as a teacher for the 2007 summer school term. (McClain Dep. at 9). McClain testified that she was at this time experiencing the same symptoms, in the same severity, as in 2010 when she first claimed disability. (Id. at 22-23).
At the beginning of the fall 2007 term, McClain was assigned to teach third grade. (Id. at 37). Three weeks later, she took a medical leave due to pregnancy, but she returned to work in October of 2007. (Id.). McClain testified that her principal lacked confidence in her ability to discharge the duties of her job. (Id. at 40). She was almost immediately assigned two mentors. (Id. at 41). These mentors remained assigned to McClain for most of the remainder of her employment with LCS. (Id. at 45).
During the 2008-09 term, McClain received numerous written criticisms of her job performance. In March, August, and October of 2008 and May and July of 2009, McClain was issued disciplinary memorandums directing her not to leave her classroom unattended or leave the building during the day except for lunch. (LCS Document Production, DE 49-3 at 4-10). The October 2008 memorandum included a five day loss-of-pay suspension and advised that further misconduct by McClain would result in termination. (Id. at 8). The May 2009 memorandum documented McClain’s continued disobedience and noted a recommendation that McClain’s contract be terminated. (Id. at 7). The July 2009 memorandum documented still further disobedience and advised McClain for at least a third time that she could be terminated if she continued to leave the building without permission. (Id. at 5).
In December of 2008 and March and November of 2009, McClain received poor performance reviews criticizing a number of aspects of her job performance. A performance review dated December 5, 2008, criticized McClain for not sufficiently managing her classroom, for how she handled allowing students to go to the bathroom, for failing to enter certain data into school computers, and for failing to turn in lesson plans. (McClain Dep. Ex. 2-3; Lamson Aff., Ex. A at 220-31). McClain was also criticized for sitting behind her desk reading to herself for long periods of time rather than walking around and interacting with students. (McClain Dep., Ex. 3). McClain was criticized for leaving her classroom unattended and leaving the building during her prep period without permission. (Id.). The December 2008 review concluded that McClain would “need to improve her teaching ability and opportunities for students if she is to remain a teacher here at Landis Elementary.” (Id.).
The March 2009 review similarly criticized McClain for problems such as her failures to enter student grades into the school software, failures to turn in lesson plans, failures to return graded work to the students, and sitting behind her desk rather than interacting with students or supervising their work. (Id. at 55). The March 2009 review further criticized McClain for an incident in which she had been notified that no science grades had been entered for a 9 week period, and she responded by adding two homework grades of 100% for each student so that each and every of her students received a 100% A in science for a 9-week grade. (Id.). McClain was also criticized for showing videos during ISTEP week “when prime teaching and reviewing should have been taking place.” (Id.). The March 2009 review also criticized McClain for unexcused absences, and, significantly, for continuing to leave her classroom unattended and leaving the building without permission during work hours. (Id. at 60-62, Ex. 2).
The March 2009 review concluded by again noting that McClain would “need to improve her teaching abilities and opportunities for the students if she is to remain a teacher here at Landis Elementary.” (Id. at Ex. 2). McClain was placed on a School Improvement Plan which required her to, among other duties, keep her paperwork up to date, cease leaving her classroom unattended, and cease leaving the building without permission. (Id. at Ex. 4). McClain admits that she failed to remedy many of these behaviors even after receiving the School Improvement Plan. (Id. at 49, 62). McClain received another negative review in November of 2009 addressing the same general issues raised in the December 2008 and March 2009 reviews. (Lamson Aff., Ex. A at 220-31).
LCS escalated McClain from a “School Improvement Plan” to an “Intensive Assistance Plan” or “IAP”, which McClain characterized as a “last chance.” (McClain Dep. at 67; Lamson Aff. Ex. A at 231). The IAP required McClain to attend training, to turn in detailed lesson plans weekly, to keep her other paperwork up to date, and to cease leaving the building without permission. (McClain Dep. at 67-70). Despite the specificity of tasks listed in the IAP, McClain claims that she failed to meet some of the requirements because she “didn’t understand” what to do and just “didn’t get it.” (Id. at 69).
McClain testified that the poor performance reviews she received in 2008 and 2009 were the result of cognitive limitations she had suffered since the October 2006 CVA. (Id. at 20). McClain testified that, as early as 2007, “I had trouble with time management. I had trouble with processing new information. I had trouble connecting my life with prior knowledge.” (Id.). She testified that starting shortly after the 2006 CVA, she suffered decreased motivation: “I used to be kind of a go-to person. If you wanted it done, I would get it done, and that’s - I don’t have the organization and ambition to do it.” (Id. at 21).
McClain also testified that she began to have hearing loss in 2007, around the time of her return to work. (Id. at 28). McClain testified that these hearing issues became worse by the fall of 2009. (Id. at 27-29). McClain claims that she was “forced” to sit behind her desk - a practice criticized by LCS - in order to “hear” the students as early as March of 2009. (Id. at 55-56). McClain’s performance reviews show that she was receiving criticism for sitting behind her desk as early as December of 2008. (Id. at Ex. 3). McClain admits that she never attempted to wear hearing aids to improve her hearing. (Id. at 29). McClain does not see any provider regularly about her hearing problem. (Id. at 31).
One of the mentors assigned to McClain, Tom Anders, had worked with her both before and after her stroke. (Anders Aff. ¶ 4). Prior to her stroke, he describes her as an excellent educator: dynamic, organized, patient, and a leader. (Id. at ¶ 5). After her stroke, she was “a totally different person.” (Id. at ¶ 6). “Her personality had changed; she was not organized; she was not able to multi-tasks [sic]; she was overwhelmed; she was easily flustered; and she couldn’t meet deadlines.” (Id.). Anders met with McClain once a week to try to assist her. (Id. at ¶ 7). According to Anders, “no matter how hard [he] and other members of the faculty tried, [they] were not able to bring Lisa back to being the highly functioning educator that she was before her stroke.” (Id.). They tried everything they could think of to help McClain between the fall of 2007 and January of 2010, “but it became undeniable that she could not meet the responsibilities of her job.” (Id. at ¶ 8).
On January 22, 2010, McClain was placed on a paid leave of absence from LCS “due to medical issues which are impacting [her] performance.” (McClain Doc. Prod. DE 49-2 at 7). McClain’s paid leave of absence lasted until October 1, 2010. (McClain Doc. Prod. DE 49-3 at 1). On June 9, 2010, Craig Blume, teacher’s union representative, sent the LCS superintendent a letter requesting that LCS extend “due process timelines [sic]” for any decision on McClain’s employment status. (LCS Document Prod. DE 49-3 at 2). The teacher’s union proposed that LCS “rescind that letter of notification on the consideration of cancellation of her indefinite contract” if McClain’s long-term disability benefit claim was approved, but “reactivate the cancellation letter . . . affording her the opportunity to submit a letter of resignation if she chooses” if her claim was denied. (Id.). On October 8, 2010, LCS sent a letter to the teacher’s union by counsel, confirming “phone conversations earlier this morning wherein Logansport Community School Corporation and . . . Lisa McClain have reached an agreement with respect to her current employment status. At this time the parties agree that she will remain on unpaid leave, without benefits, until her long term disability appeal is resolved, either favorably or unfavorably.” (Id. at 1). It appears that McClain remains on unpaid leave at this time.
McClain’s Disability Claim
McClain filed a claim for benefits with Madison on May 13, 2010. (Lamson Aff. Ex. A at 336-38). She indicated that she ceased work on January 22, 2010, but that her claim was related to her stroke in October of 2006. (Id.). She indicated that she was still recovering from the stroke and that her symptoms were poor memory and difficulty processing new information. (Id.). She also indicated that she could return to work if accommodations were made. (Id. at 337). McClain claims that the symptoms that made her unable to work in 2010 were the “same sort of symptoms” she complained of shortly after returning to work in 2007. (McClain Dep. at 22). She indicated that the symptoms were “the same” when she stopped working in January of 2010 as they were when she returned to work in 2007. (Id. at 22-23).
The parties dispute whether McClain has consistently maintained that the condition that caused her to stop working in 2010 are the same as those she experienced since her stroke in 2006. Defendants initially argued that “McClain’s claim for benefits contends that she became disabled on January 22, 2010" not that she has been working while disabled since her return in 2007. (DE 57 at 8). But, in reply, Defendants conceded that the claim form is actually “silent on the date she became unable to work.” (DE 66 at 2-3)(emphasis in original). Defendants suggest that they tried to clarify this uncertainty by seeking additional information from Dr. Dutter, one of McClain’s treating physicians. Dr. Dutter indicated that “what changed” in January of 2010 was that McClain became “unable to keep up in the classroom; less support/assistance.” (Dutter Dep. Ex. L.). Madison asserts that it took this as a confirmation that while McClain’s symptoms may have began in 2006, they did not become impairing until 2010, after the effective date of the Policy. (DE 66 at 3). Madison also notes that McClain’s counsel indicated in an appeal letter that “as of January 22, 2010, Ms. McClain was no longer able to work at all.” (Lamson Aff. Ex. A at 153). LCS completed a “Long-Term Disability Claim Job Analysis” indicating that McClain became disabled on January 25, 2010. (Id. at 166-67). And, the amended complaint itself in this matter indicates that McClain taught at LCS for nearly 14 years “until she became totally disabled on January 22, 2010.” (Complaint, DE 26 at ¶ 11).
McClain alleges that she is unable to perform the material duties of a teacher because she is no longer “able to predict where a situation could go” and “can’t multitask, ” as documented in her December 2008 and March 2009 performance reviews. (McClain Dep. at 23-24). Those claimed limitations and her ability to perform as a teacher were generally the same when she ceased work in 2010 as they had been at least as early as December of 2008. (Id. at 24, 64). Referring to her reviews, McClain testified, “[p]age after page after page, I’m not getting it [teaching] done. I can’t do it. I can’t teach. I can’t work. I’m disabled.” (Id. at 73). In short, although McClain has not always clearly annunciated when she believes she became unable to do the material aspects of her job, it is nonetheless undisputed that McClain claims her disabling condition began in 2006. (McClain’s Response to Interrogatory No. 2(b) and (e)). According to McClain’s interrogatory responses:
As of October 24, 2006, I have been unable to perform one or more of the material duties and responsibilities of my occupation as an elementary school teacher. Through the assistance of mentors and staff, I was able to maintain my employment despite being unable to perform all the material duties of my job until January 22, 2010.
(Id. at No. 20). This is consistent with the opinion of one of McClain’s treating physicians, Dr. Dutter, who opined that “disability started when the stroke happened, before she even went back to work.” (Dutter Dep. at 21). Dr. Dutter opined that she was not capable of performing all of the material duties of her job as a teacher at any point after the stroke. (Id. at 23-24). Although McClain’s neuropsychological testing looked “pretty normal, ” Dr. Dutter speculated that McClain had concentration issues that might not show up on examination. (Id. at 38).
Madison’s Policy of Insurance
The Policy under which McClain seeks long-term disability benefits was issued to LCS with an effective date of January 1, 2010. (Lamson Aff. Ex. A at 13). The Policy’s insuring clause states: “If you become disabled while insured under the Group Policy, we will pay LTD Benefits according to the terms of your Employer’s coverage under the Group Policy, after we receive satisfactory Proof of Loss.” (Id. at 20, § I). According to Defendants, the Policy’s definition of Disability or Disabled can be found in Amendment 1 and is as follows:
1. during the Elimination Period and your Own Occupation Period you are, as a result of Physical Disease, Injury, Mental Disorder, Substance Abuse or Pregnancy, unable to perform one or more of the Material Duties of your Own Occupation. ...; or
2. during the Elimination Period and the first 24 months you are Disabled with Work Earnings, your Work Earnings are less than 99% of your Predisability Earnings as a result of Physical Disease, Injury, Mental Disorder, Substance Abuse or Pregnancy, and you are incapable of earning 85% or more of your Predisability Earnings....
(Id. Ex. A at 45-46).
McClain suggests that a different definition of disability, the one in the original certificate of insurance, is applicable:
Disability or Disabled means that during the Elimination Period and your Own Occupation Period you are, as a result of Physical Disease, Injury, Mental Disorder, Substance Abuse or Pregnancy, unable to perform one or more of the Material Duties of your Own Occupation, and, due to such inability, your Work Earnings are less than 99% or more of your Predisability Earnings.
(See Lamson Aff. Ex. A at 27). The definition McClain relies upon was replaced with Amendment 1, which, according to the amendment itself, became effective on January 1, 2010. (Lamson Aff. Ex. A at 43, 45-46).
The Policy defines “Own Occupation” as “the occupation you routinely perform for the Employer at the time Disability begins.” (Id. Ex. A at 17). Further, the Policy provides that, “[w]e will look at your occupation as it is normally performed in the national economy, instead of how the work tasks are performed for a specific employer or at a specific location.” (Id.).
“Material Duties” is defined as “the duties generally required by employers in the national economy of those engaged in a particular occupation that cannot be reasonably modified or omitted....” (Id. Ex. A at 20, § II).
Additionally, benefits are not payable until Madison receives proof of loss that it finds satisfactory. (Id. Ex. A at 35, § XX.B.3). Madison reserves the right to “investigate a claim at any time.” (Id. Ex. A at 35, § XX.C.1).
The Policy requires that, to be eligible for insurance under the plan, you must be an “Eligible Person.” (Id. Ex. A at 20, § II). To be an “Eligible Person” five requirements must be met: the individual must be an employee, a citizen, “Actively at Work and capable of sustained Active Work”, not a part-time, temporary, or seasonal worker, and satisfy your waiting period. (Id.). “Active Work” and “Actively at Work” are defined as “performing all the Material Duties of your Own Occupation at your Employer’s usual place of business, and satisfying the Minimum Hourly Work Requirement.” (Id. Ex. A at 20, § II.A.3.a). However, “[i]f you were eligible for insurance and insured under the Prior Plan on the day before the Plan Effective Date, you can become insured on the Plan Effective Date without meeting the Active Work requirement under Section II.A.3.” (Id. Ex. A at 26, § VI.A).
The Policy also provides, with regard to the effective date of insurance, that “[i]f you are incapable of sustained Active Work due to a Disability on the day before the scheduled effective date of your insurance, such insurance will not become effective until the day after you are capable of sustained Active Work and complete one day of Active Work as an Eligible Person.” (Id. Ex. A at 20, § III.B.3). The parties disagree regarding whether this provision is applicable to McClain.
Madison’s Consideration of McClain’s Claim for Benefits
Upon receipt of McClain's claim in 2010, one of the very first actions Madison National took was to inquire whether McClain had been insured under the school corporation's prior disability policy. (Lamson Aff., Ex. A at 236). The Claim File shows McClain's effective date of coverage under the Madison’s Policy as January 1, 2010. (Lamson Aff., Ex. A at 3).
McClain’s claim was considered by Senior Claims Analyst Lisa Caflisch (“Caflisch”). (Caflisch Dep. at 32). Caflisch obtained and considered a wide range of information, including the claim form submitted by McClain and discussed above. She also considered the opinions of Dr. Dutter. Dr. Dutter provided an “Attending Physician’s Statement” which lists her symptoms as “history of CVA, aneurysm of middle cerebral artery, S/P VP shunt.” (Dutter Dep. Ex. I). Dr. Dutter indicated that McClain’s allegedly disabling symptoms first appeared in October of 2006. (Id.). Dr. Dutter indicated that McClain’s condition had improved since October 2006 but that he “never” expected to see a “fundamental or marked change” in her current condition. (Id.). Caflisch also considered a letter from Dr. Dutter dated February 9, 2010, which includes the following:
First off Lisa is a walking miracle. She was very fortunate to even survive the aneurysm and CVA that she did have. She has made a miraculous recovery. This however does not mean that she is able to function in the classroom at her previous job like she was able to before the CVA. Physically her exam is very normal. And with memory and recall again her exam is pretty normal. This does not take into account distractibility concentration et cetera. I do feel that she has to be considered for long-term disability because of her inability to perform like she was able to prior to the CVA.
(Id.). Caflisch requested further information regarding what changed in McClain’s condition around January 22, 2010, and in response Dr. Dutter wrote that McClain was “unable to keep up in classroom; less support/assistance.” (Id.). At his deposition, Dr. Dutter clarified that he meant that McClain’s condition did not change in 2010, but her employer’s willingness to accommodate her changed. (Id. at 53-54). Caflisch obtained notes from McClain’s office visits with Dr. Dutter. (Id. at Ex. N). These notes indicated Dr. Dutter performed a “mini-mental state” exam and that McClain scored a perfect 30 out of 30 on the exam. (Id.). Dr. Dutter provided Caflisch with a note indicating he advised McClain to cease work on February 9, 2010. (Id. at Ex. M). At his deposition, Dr. Dutter was unsure whether he told McClain that she should stop working. (Id. at 27).
Caflisch reviewed the entire claim file. (Caflisch Dep. at 32). She contacted McClain to request further information. (Id. at 33, Ex. 1). She also contacted LCS and discussed McClain’s job performance with Teresa Popejoy (“Popejoy”). (Caflisch Dep. at 36-38, Ex. 1). She investigated whether McClain was covered by LCS’s prior disability policy. (Lamson Aff. Ex. A at 235). Caflisch brought up that McClain had been back to work for 3 years since the time of her CVA and asked Popejoy ...